Tuesday, December 17, 2013

In "Climbing the Ladder to Nonprofit Success"* I
try to emphasize that state and Federal laws governing nonprofits may not be
the same. As tax season approaches, one of the areas that differs from state to
state is whether or not you must have audited financial statements.

When deciding whether to accept a client requesting grant
writing services, I pretty much have two iron-clad rules. You must be a
501(c)(3) and you must have formal accounting procedures in place that are at
least capable of producing financial statements. My reasoning behind that is
those are the two of the three things virtually every foundation or corporate sponsor
requires, with the third being the 990. Without them, your application or
entreaties for funding are going nowhere.

More importantly, not having at least the ability to produce
audited financial statements can put you in violation of tax reporting laws.

The Council for Nonprofits has a list
of states that will help you determine if your state requires audited
financials. If you still have questions, the list also links to the specific
regulatory reference for each state, or you can contact your state tax
commission.

Income doesn't always
predict the need for an audit.

While most small or new nonprofits will initially be under
the income threshold that requires audited financials, several states require
an independent audit if the organization employs "a professional
solicitor", regardless of the revenue level, or if the organization
receives a significant portion of their income from state funds. In general "professional
solicitor" means any employee or
paid professional that helps you raise funds, and can and usually does
include everything from your CEO to your office manager, to contracted grant
writers and phone solicitors. Also, an
independent auditor can't be the person who records or reviews your financial
transactions on a regular basis.

Also noteworthy is that varying revenue levels may also
require lower-level independent reviews such as an accountant's review or
letter of compilation. For instance , Pennsylvania requires an independent
auditors review of one form or another if your gross annual income exceeds
$50,000, although the full-blown audit requirement doesn't kick in until
receipts reach $300,000.

Audits aren't fun.

Last year, one of my former clients contacted me after her
first-ever audit and was thoroughly incensed about the "intrusive
behavior" of the auditors. The auditors had interviewed several of the
staff members regarding how donations were recorded, and when the interviews
indicated a somewhat chaotic system, they dinged the organization in their report.
She was also angry that they "demanded every single receipt and every
single phone message note" to back up expense records, including whether
employees had called in or provided doctor's confirmations for sick pay. She
wasn't complaining about having to provide the proof, as much as she was about
the "inordinate waste of time" required to dig up the records "to prove a $22.00 expense".

This is what an audit does. It isn't about whether you can
add two and two. It's not even just about whether your books are in balance. It
also evaluates whether you are exercising sound financial management. It can provide
clues regarding the expertise of your staff. Perhaps you are recording expenses
under the wrong category, or maybe you are reporting donations as unrestricted
when they should have been applied to a specific program's income and spent
only for that program. Maybe you are carelessly co-mingling personal and
organization funds. It can uncover problems like embezzlement.

Audits should be
learning opportunities.

Assuming that your audit problems stem from a lack of
knowledge and not outright attempts to deceive, then your audit should be
viewed as a chance to improve. You should want to have complete confidence that
all the financial controls are in place, and that your financial position is
exactly what it appears to be, good or bad. You should be willing to either provide staff training or
replace incompetent staff with people that know the rules and follow them.

Audits provide
credibility with donors.

Being able to state that your financial dealings are honest
and above-board as evidenced by your audit report reassures donors that their
money will be used as they intended it to be when they gave it to you. That
level of confidence can greatly impact growth in donations.

Good records mean
smooth audits.

Depending on the type of audit or review, there are certain
levels of sampling required under GAAP (Generally Accepted Accounting
Principles). You are never going to get by without providing some selected
source material, i.e. the invoice, receipt, purchase order, payroll check, deposit
slip etc. that backs up the journal entry. Written procedures and even minutes
of board meetings will also be on the request list.

However, if everything the auditor requests checks out the
first time, there is usually no need for the auditor to keep digging. If the
auditing firm has been hired on a total fee basis then they want to get done as
soon as possible, but they are also required by law to investigate any irregularities.
If they find something they don't feel is quite right, they have to keep
digging until they have an explanation.

Hiring a proficient bookkeeper or retaining a bookkeeping
firm to review your financial records monthly or at least quarterly might seem
like an avoidable expense when you are first starting out, but in the long run,
it will pay for itself in terms of smooth audits and happy donors. It is far
better to learn to do things properly
now, before bad habits turn into bad audits!

Wednesday, December 11, 2013

I get a lot of emails that start out "I have a really
dumb question, and I hate to put it in the comments because people will (laugh
at me) (think I'm dumb)"

First of all, there is no such thing as a dumb question. The
only thing that's not too smart is to flounder along because you are afraid to
ask. Having said that, I know that privacy is important, particularly in
today's world. While I plan on maintaining this blog without requiring a
subscription for now, the volume of mail I am receiving tells me that it may be
time to consider a subscription option. I am finding that I am answering the same
questions repeatedly, and I think I can be of better service to you by
aggregating them and answering them as a single topic. Request volume will
determine frequency of the posts, but at present I am looking at a monthly
newsletter format.

If you would like to have the ability to comment or ask a
question within a network of sympathetic
nonprofit peers or receive more information about any of the topics, and receive occasional subscriber-only
grant notifications, please send your email address and any topics you would
like me to discuss to: granthelp@ida.net. I plan to go live with the
content on January 15, 2014.

While I will still try to
answer specific questions individually, many of the questions have common
themes. Subscribers will get access to content answering those questions or concerns.
Also, I occasionally find grants that are particularly well suited to small
organizations, and I will include those for subscribers only.

Again, if you would like to subscribe, you have
to send me your email. You can unsubscribe at any time. UPDATE! - The first newsletter will be on "Are nonprofit volunteers considered as employees under the Affordable Care Act?"

Tuesday, December 10, 2013

In the life cycle of nonprofits there often comes a time
when you need to expand your brick-and-mortar footprint. Maybe you need a
larger administration building, or you want to build or renovate a structure to
house clients, or expand your capacity by adding a larger warehouse. None of
these things are free, so you may think that your first need is funding…lots
and lots of funding.

New or inexperienced nonprofits typically think that because
the need is so obvious the money will just magically arrive on time, and too
often, that time frame is stated in weeks or months. In reality it can take
years, and the process can resemble a military campaign.

Some nonprofits immediately start to look for grants to
finance the construction or purchase. In reality, that's almost the last step.

After you establish a clear need and define the impact, most
grantors want to see that your community monetarily supports the project, so
making grants your first step is going to be pretty futile. In general,
grantors do not want to provide more than fifty percent of the cost. The
exception to that may be asking for funding for a feasibility study and
sometimes for a planning document or architectural plans. So, if getting grants
for the construction or purchase isn't first, how do you move forward with a capital
campaign ?

1. Define the need.

Why does your organization want to do this and what will the
community or your clients get out of it?
Why doesn't your current building inventory meet that need? While you may feel that your organization
"deserves" nicer quarters, unless that contributes to mission
accomplishment, your funding appeals are going nowhere.

2. Demonstrate the benefits to the community or to your core
mission.

What will the new building do to help your core clients? For
instance if you are a food bank, adding a cold storage warehouse will allow you
to improve the diets of your clients by adding fresh produce to your food
inventory. This is your case statement or statement of need. What will be the
positive impact of the expansion?

3. Set a budget goal.

For this you will need to some preliminary research on actual
costs. At this stage, you might be able to get by simply researching what
similar buildings and/or land costs in your area have been historically. You
might call a few builders and architects and see if they will give you
hypothetical per square foot building costs, or you may be able to research
construction permits for similar buildings in the recent past. Check with your
county clerk to see if you can research the permits. If your county keeps a
record of land sales (not taxable value) you can look those over if you are
contemplating purchasing land, or consult several real estate firms to see what
comparable sites have brought in the recent past. You are looking for a
ballpark amount for now, but you will have to pay to firm up the costs and
planning at some point.

When establishing a preliminary goal, don't forget that you
may need to increase staff to support mission expansion. Donors want to know
that after the building phase is complete there will be staff or other
resources on hand to attain the service objectives you have outlined in your
statement of need. You will not include this cost in a capital campaign, but it
is a question that comes up with some regularity on applications and onsite
interviews. Organizational readiness and capability are definitely considered
by donors.

5.Is the project feasible?

Determine if there is any monetary community support for
the project. At this point you aren't looking for a full-blown
feasibility study, just a feel for
whether this project is something the community will donate to accomplish.
Grantors often don't even consider funding until you have raised fifty percent
of the funds locally or at least regionally. Note: whatever your budget
guesstimate is at present, be aware that inflation and rising costs will have a
significant effect by the time you actually start construction or close a
purchase deal. That is because it takes time to raise money, and prices
typically do not go down over time. A rule of thumb is to add in at least 5% a
year, or more if there are significant inflationary pressures.

6. Establish a timeline for fundraising.

Larger capital building campaigns take at least two years
and often five years or more before everything comes together and you can break
ground and actually construct the building. Outright purchases of existing
space will have a shorter timeline for acquisition, but of course while you are
raising money, the property could be sold to someone else. It is much better to
have the funds on hand before moving forward. Break your project timeline into
stages so that you can fund raise in phases. For instance you may want to raise
ten or fifteen percent of the total for a feasibility study and architectural
plans. Donors can relate to visuals, i.e. plans much better than they can to a
general description.

7. Create a fundraising strategy.

Most capital projects receive their seed money from one or a
few major local donors. Local individual contributions are helpful, but usually
don't contribute enough money fast enough to accomplish the whole project on
schedule. When you can see that you are at or approaching pledges or actual
donations of 50% of the total cost then you can approach foundations,
corporations and even the government for the balance from grants. You should
have already researched the best prospective grantors, and perhaps even started
to create a dialogue with them if they are local. At the very least find out
when they typically open their grant cycle, and what their giving history has
been in the past.

8. Think about loans.

Everyone wants to think that they can fund raise for all of
the costs, but at least consider loans. If your nonprofit has a reasonably
steady income from fees or services, this could be your fastest route to success.
Donations are not usually considered as good collateral, since they can vary
considerably year over year. If you typically have excess funds at the end of
the year that can be committed to servicing the loan, this could the route for
you. Again, if you have 50% of the cost covered by donations or pledges, loans
become much easier to secure.

9 . Formalize your planning.

If you have gotten this far, it is probably time to move to
funding a formal feasibility study, case statement and building plans or quotes
for the structure. This is one area that you may be able to find grant funding
to provide financing. The cost is less than the whole project, and grantors
would rather see that you are doing your due diligence than throw money at a
dream. If you have a well designed project, good preliminary cost projections,
a clear need and a provable future benefit, there may be grantors willing to
provide seed money to formalize your
planning.

10. Be prepared to pay for professional assistance.

While the director of development or even the ED may be
willing to assume this responsibility, formal feasibility studies are more
readily accepted if they are done by objective third parties. These firms will
conduct extensive interviews of past and present board members, staff, donors
and even vendors to prove (and in some cases disprove) the feasibility of going
forward with the project. Architects do not provide plans for free. By doing the first nine things above well,
you may considerably shorten the amount of professional time necessary to
create the formal documents. Conversely, you may want to turn it over to the
pros in the beginning, simply to free up staff time.

Constructing and implementing a capital campaign is labor
intensive, but like most things in life, you will get out of it what you put
into it.

Monday, December 2, 2013

The eWomenNetwork Foundation aims to encourage an
environment of caring, healing, and growth for women and children by helping
them to achieve optimum potential in all spheres of their lives. To that end,
the foundation is accepting proposals from nonprofit organizations for projects
designed to improve the emotional and financial well-being of women and
children.

The foundation awards individual grants of $6,000 to small
entrepreneurial organizations that address the health, wellness, and/or safety
of underprivileged women and/or children. In addition to the cash grants, the
foundation will sponsor a representative of each recipient organization to
attend a special grants program at the eWomenNetwork International Conference
and Business Expo in Dallas.

Be a certified 501(c)(3) non-profit; an Internal Revenue
Service "Letter of Determination" must be available for
submission/review. Canadian organizations must be registered with the Canadian
Revenue Agency and be able to provide a letter of registration for review

Have been in existence for over three years, with an annual
budget of over $25,000 and under $1 million and not be a part of a national
organization.

Not be affiliated with a national organization.

Have submitted Internal Revenue Service Form 990 for two
consecutive years and be able to submit an interim financial statement
representing data as recent as the last 90 days.

Every successful nonprofit can trace its success back to a
founder that had the foresight to assemble an effective board of directors.
Good boards are not born, they are cultivated and grown.

There are boards, and then there are BOARDS. Good boards are
not like a pile of cut lumber. They are more like branches of a tree, in that
they constantly nurture the mother plant, evolve to meet changing conditions,
and send out seeds or runners to stay alive and viable. Once a pile of lumber
is used up, it's just gone. It's static, because the pile will only produce a
pre-conceived structure. A tree keeps producing living tissue for decades, even
centuries.

Developing good boards takes the skill of a master arborist.
You have to know how to select the right seed stock, when to prune away the
dead wood, and how to nurture it so it can produce the best fruit, before your
nonprofit can collect a successful crop. Here are some of the indicators that your board is growing well.

A good board provides
structure for the nonprofit.

It maintains a coherent mission-centered direction, imposes reasonable
limitations on behavior and finances, and oversees and guides mission
accomplishment. Board members are legally responsible for the conduct and
financial integrity of the nonprofit, as well as the success of the mission.

Good boards
participate financially.

Every board member should have some financial investment in
the organization. That doesn't mean the board is, should, or can be the sole
support of your NPO. It does mean that they should give an annual sum that
shows they are personally invested in success. Grantors often ask for the
amount each board member contributes annually. That amount should show real
commitment relative to the size of the nonprofit and its mission. For very
small or new nonprofits maybe that's a few hundred dollars a year for the whole
board, while larger organizations might expect a minimum four-figure donation
from each member. After all, if the board doesn't support their own
organization, why should anyone else?

Good boards set goals
and make decisions.

The board must have performance standards and clear goals
for the organization. If the same action items are on every agenda, or there is
no or little progress being made in achieving predetermined goals, the board
must be willing and able to take corrective action.

Good boards understand the requirements of fundraising.

Every board member should understand how much needs to be
raised, why it needs to be raised, and have a basic understanding of the
process involved in soliciting funds.

Good boards get
involved in fundraising.

There are many ways for the board to participate in
fundraising. Perhaps they show up at events and pressers. Maybe they sign
thank-you letters to donors. They can publicize the nonprofit through their
business and personal connections. They can serve on phone lines at telethons. They
may plan fundraising events. Whatever their contributions, they are active in
the fundraising process at some point.

Good boards
understand that there is a cost to fundraising.

"Free" money doesn't exist. Someone has to write
the grants, research funding opportunities, attend events where there may be
sympathetic prospective contributors, and manage the grants. Paper, printing,
and distribution of fundraising documents or other marketing costs actual
money. Controlling fundraising costs
can't be limited to "if it costs money we ain't doin' it". Pick a
reasonable percentage of the budget to devote to fundraising, monitor its ROI effectiveness,
and accept that cost without complaint.

Good boards show up.

Good boards have strict meeting attendance and conduct policies
and enforce them. The board chair must take attendance and educate, caution,
and finally eliminate no-show, unreasonably disruptive or overly passive board
members and recruit new ones that will take their responsibilities more
seriously.

Good boards invite civil
discussions on issues.

Boards should not be rubber-stamps for the founder, board
chair or president. No member should feel that they can't offer a suggestion or
request clarification of a point. On the other hand, a good board chair does
not allow these discussions to degenerate into shouting matches. Meetings
should be run under Robert's Rules of Order, and after a reasonable discussion
period any new information or dissenting opinions should be either voted upon,
tabled and considered in the next meeting, or assigned to a committee for
further investigation.

Growing
your board is a learning experience, but the end result will be well worth the
effort.

Friday, November 22, 2013

Many good people want to start nonprofits. They usually have
great passion for their cause, and want to solve problems. They expect smooth
seas and clear sailing on the way to their destination. Unfortunately, they
often run aground on the rocks of reality. Here are some common pitfalls
associated with starting a nonprofit.

1. You haven't
developed a support network.

Nonprofits don't function well as one-man (or woman)
shows. Start by identifying supporters, and hold a well-publicized
informational meeting or two to assess the interest in your nonprofit. These
folks will be your potential board members, donors and volunteers and the
meetings may generate immediate financial support.

2. You think your
organization is the only one that can address the problem you want to solve.

It is unlikely that no one else has seen the problem you are
seeing. Don't re-invent the wheel. Check for nonprofits in your area that are
addressing the same issues, especially those that are currently receiving
funding. There is a good chance that you may find not only kindred spirits, but
organizations that are already dealing effectively with the issues that you can
join. If no one else is in the arena, there is probably a good reason why they
aren't.

3. You believe it is
easy to get money to support the organization.

You may be willing to invest every dime you have in your
organization, but the world of nonprofit funding is competitive and notoriously
difficult to access for fledgling organizations, particularly for day-to-day
expenses. Only about 20% of nonprofit support nationwide comes from grants and
unrestricted donations. The other 80% is
up to you to figure out.

4. You haven't
researched the skills needed to operate the organization.

The mission is important, but it takes real-world business
skills to achieve success and longevity. There are serious legal, financial and
administrative aspects involved in being a nonprofit. If you don't have all the
skills needed, you will need to attract or hire people that can fill in the
blanks.

Growing a viable nonprofit is often arduous, expensive, frustrating and
time-consuming. Starting a nonprofit is not the place to find instant
gratification.

6. You think it will
be an easy way to create a paying job for yourself.

Founders usually form part of the board of directors, since
their goal is (or should be) to guide and expand the organization. Board
members normally don't and can't receive a salary for serving on the board. If you can
accept being an employee of the nonprofit as the CEO or executive director and understand
the potential risks associated with that, there may be income potential, but it
isn't a sure thing.

7. You don't have a
coherent plan for long-term success.

You may know what you want to accomplish, but you need to
have a way to get there. The time you spend on a five-year plan now will save
you innumerable wasted and expensive hours spent in crisis management later.

Knowledge really is power. Know what you are getting
yourself into before you start. For more in-depth insight into the realities of
starting a nonprofit, I offer a free whitepaper, "Climbing the Ladder to Nonprofit
Success". Request your copy at granthelp@ida.net.
If you need assistance in implementing
or understanding any of the steps, or
just have a comment, drop me a line. Want to know more about my services? You
can view my website here.

Monday, November 18, 2013

Every once and a while I see someone railing against the
idea that nonprofits should be managed much like their for-profit counterparts.
After all, nonprofit staff can and actually should work for peanuts, right? All
supplies will be donated, all services will be free, and the quality of their
programs will still be top-notch.

If only it was that simple.

This morning I was forwarded a link to a nonprofit asking
for contract grant writing services. The ad sounded great. 21-year old
community healthcare nonprofit, multi-million dollar revenues, offering a
long-term contract with a somewhat reasonable budget range for grant writing services.

However, upon looking up their 990 history, I could see why
they were looking for grant money. Over the past five years this nonprofit
showed steadily declining income. Nearly their entire revenue stream was based
on one source of income, i.e. government payments for services. Those payments had
dropped by almost 30% in that same five-year time frame. In the meantime their
payroll costs had gone up by almost the same amount as a percentage of income.
In 2012, they posted their first loss ever and it was in the mid-six figure
range.

Healthcare is a very labor and supply-intensive field. Good
help does cost real money, supplies are not free, the utilities still have to
be paid with real money, and being a nonprofit doesn't change that.

You can see where this nonprofit is going. Newly mandated
increased costs for healthcare and the natural progression of increasing
salaries as employees stayed in place longer and improved their skills was
pushing them over the edge. In their entire 21-year history, they had raised
less than one million dollars in funding not related to the provider payments
from the government. 82% of their income was now going to employee-related
expense. Even in healthcare, that's out of line.

Nonprofits are not immune to market forces or economic
reality. If your costs of operation outstrip your income, you are going down
the tubes, no matter how big or small you are.

I don't know exactly what happened to this nonprofit. Maybe
their patient days went down, maybe the provider payments were less than
previously received for services, maybe the employees were asking for
unreasonably high salaries or the perks had gotten out of hand. Who knows? The
point is, their trend line was obviously going the wrong way, and they waited
too long to try to address it. Now they are operating in the red, and that
means they are unlikely to be considered for grant funding.

If they survive it won't be due to hiring a grant writer. It
will be because they get a hard-nosed business management consultant in there
that can get their business
operations back on track. That's where they should be spending their remaining
dollars.

There is no doubt that there are real differences between
the motivations and goals of nonprofits vs. for-profits and that is as it
should be. I addressed that in another post.
Still, whether you like it or not, the nuts and bolts of accomplishing the end result are pretty much governed by
the same realities. Ignore that at your peril.

Monday, November 11, 2013

The government-run health insurance law will suck up a lot
of nonprofit support dollars. Regardless of whether you like it, hate it, or
just don't know very much about it because of the well-publicized website
problems, it seems likely that it will have a lot of impact on the amount of
money available to nonprofits from government, corporate, individual and
foundation sources.

After earned income, government contracts make up the bulk
of nonprofit funding in the United States. It is a commonly held misconception
that the government gives away money to nonprofits with no strings attached.

In most cases, nonprofits are funded through government-provided
contract income for things like childcare. An article
in the New York Times details the general squeeze nonprofits are still feeling
after the recession, and the role of government dollars and programs in that
picture. After earned income, government funding accounts for three times the
income from foundations and forty
times the income from corporate giving.

Aside from the costs to get the Affordable Care Act website
up and running (estimated at half a trillion dollars to date) there is the cost
of providing subsidized healthcare insurance under the current law. Often
forgotten in all the hyperbole over deductibles and cancelled policies are the ongoing
administrative costs. The money to train and pay the so-called navigators, maintain
the website even after it is fixed, the personnel required to route and process
applications all comes out of tax dollars, which of course come from each
taxpayer. While nonprofits often face scrutiny for their administrative costs,
the government doesn't face that constraint.

Healthcare comprises one-sixth of the U.S. economy. While
not everyone will get insurance through the government-sanctioned exchanges (if
you don't qualify for a subsidy, you still need to get government-compliant insurance
from a "private" insurance company), the higher deductibles and in
many cases higher premiums will impact both individual and corporate incomes,
leaving less money available for them to donate.

If the federal deduction for
charitable giving goes away, as it has in some states, that will further impact how much money is available from
donations.

From the government's side, there is a high probability that
the actual cost of the subsidies may lower federal and state discretionary
spending capability.

So far, the Internal Revenue Service has not issued final
guidance on how these higher costs may factor into arriving at adjusted gross
income. If the allowable deductible amount for healthcare increases, that could
potentially impact the final amount owed on both individual and corporate
business income, which effectively reduces taxes paid to the government. If the
deductible is not raised, then the additional money has to come out of the
operating budgets of each business and individual as a direct cost. That too
lowers income, with the same net result.

With more money going out and less coming in, it stands to
reason that there could be less money available for nonprofits from all of the
traditional sources.

If your organization hasn't factored these uncertainties
into your five year plan as yet, it might be time to do so. Although many
nonprofits find generating earned income and operating like a business to
acquire that income to be distasteful and in direct opposition to their
mission, survival may dictate that you adapt to that model.

Wednesday, November 6, 2013

On a one to ten scale of what's sexy or exciting, financial
statements generally rank at about minus one for most nonprofit board members. Nonprofits
still in the early growth phase may not fully understand the relationship of
the board's financial or fiduciary responsibility to their overall governance
role. There may not even be a formal accounting system in place.

Board members, whether nonprofit or for-profit, typically
aren't finance or accounting majors. I can clearly remember sending out the
financials to the board members of a small nonprofit in advance of an annual meeting.
One of them called and very nicely but sincerely told me that I shouldn't waste
postage and paper sending them to him in the future, since it was all
"just so much gobbledygook to me". When I explained that I was
required to send them because the board was responsible for understanding the
financial position of the organization, he asked if I could just tell him where
on the papers he could see whether the organization was making or losing money.

This is an all-too-common reaction to the financial portion
of a board agenda. In many cases, once the board meeting starts, the
chairperson asks if anyone has any questions or comments, and then there is a
voice vote to accept all the financial information as written. It's almost a
Pavlovian response.

Fiduciary oversight
isn't optional.

The problem with that is once you vote to accept the
financials, you are effectively saying that you know what's in them. If
something is amiss, you can be held responsible for any problems.

For those nonprofits that say they don't need financial
statements due to their small revenue streams, or because they are about
mission, not money, listen up. If you are a nonprofit corporation, you may be
required to use the accrual method of accounting. That means you do need some
sort of basic accounting system that can produce financial statements. Leaving
the tax man out of it, prospective donors and grantors expect it as well.

Most board members don't intentionally shirk their fiduciary
duties, and they are not too lazy or mentally incapable of understanding
financials. Financial reporting is simply a foreign language to them. Sometimes
they are successful professionals in other fields, but they rely on a staff of
accountants to keep the books and synopsize any findings. Other times they are
community members whose closest brush with accounting is when they file their
taxes. Sometimes they just don't understand the legal impacts of
rubber-stamping the financials.

Ignorance isn't bliss.

Not knowing what's contained in the financials is not a
defense. Shareholders, members, donors, and the IRS won't accept that as a
reason if there is some sort of mismanagement, fraud, or other illegal act
discovered. The solution to that is developing a basic ability to understand
the financial statements.

There are a number of mini-courses, books and video
presentations available that offer financial training for non-financial people.
Think of them as sort of a pocket dictionary for another language. When you
travel to another country, you may not need or want to know how to carry on an
hour-long conversation in another language, but you do need to know how to ask
for a doctor or a bathroom.

No degree required.

This isn't about becoming a certified financial professional
and to some extent, it isn't even about that much argued-over bottom line. Depending
on your board composition, even a one or two-hour presentation can be
sufficient to provide all the knowledge most board members need.

Local
associations of financial professionals often have seminars that can be
scheduled into a retreat or executive training session. In a pinch, you could
even have a independent accounting professional or instructor attend a board
meeting and explain the financials once a year. The goal is to be sure that everyone has at
least a basic understanding of what to look for relative to seeing problems or
trends. The purpose of reviewing financials isn't to check the math, it is to
obtain operational guidance for the board.

Financials are more
than just numbers.

The purpose of this instruction is not to turn the board
into bookkeepers or accountants. It is simply to provide a way for the board to
recognize problems or trends. For instance, if the depreciation figure is
significantly different from last year or the last quarter, does that mean that
something new was purchased? If so, what
is it, what did it cost, and is that cost reflected elsewhere in the financials?
If not, why was the figure adjusted? If it is significantly lower, does
something need to be replaced because it is too old to function properly
anymore? Does that affect net worth?

For many organizations, November is approaching the end of
the fiscal year. Think about offering financial statement training as a year-end
training camp or informational webinar. Some members might even consider it a
perk!

Saturday, November 2, 2013

Grant planning doesn't start with finding a grant. I get
dozens of inquiries like this every year.

" We provide decorated
Christmas trees to low-income families. We need a grant to assist us in
purchasing 100 trees. Please help us find grant money for this worthy
cause" Rcvd. Nov. 1

Requests like this don't take into account the lead time
needed to find a grantor, and certainly doesn't allow any time for the grantor
to respond. Grant planning requires you to be proactive, not reactive.

Grant planning
requires foresight

Grant planning begins at least one year from the time you
need the money and it starts with refining your mission into a program or
programs with a budget, and a specific, measurable goal. Here are some of the
questions I asked this particular nonprofit.

How many trees do you need?
What is your budget? Are there
trees available at a price that will allow you to furnish 100 trees? Have you
worked with vendors (tree farms, direct sellers, etc) to get a discount? Do you
have a contract to provide the trees at a stated price? What size trees do you
need? What about transportation, both to you and to the recipients? What
species of tree do you want? Do you have alternatives? How do you qualify
people to receive a tree? Can you store the trees, or do you need them very
close to the distribution date? Who has supported this cause in the past?

Setting up a prospect
calendar

Typically, foundations plan their giving cycles at annual,
semi-annual or quarterly intervals. The application closing date for the grants
might be as much as a year ahead of when the grant is awarded. That's why this
is called grant planning, not grant getting.

After you have mapped out the when, where, how much and why
for your appeal, it still has to fit into the grant calendar for the foundation.
That means finding the prospective grantors well ahead of the opening date of
the grant application or RFP date. Arrange your prospective targets in a format
that allows you to sort by RFP opening date, closing date, amount available,
and enter those into a working calendar or spreadsheet.

Qualify targets

If your targets are local, establish some sort of
relationship with them ahead of time. Follow them on Facebook, or go to events
they frequent. Find out who is on their board, and look for common associations
with your board. Check to see if they have a prequalifying phase (an LOI or
online qualifying protocol). Look at their previous giving patterns and assign
a priority to the ones that are most likely to respond well. There is no sense
in "shotgunning" your requests to any and all foundations that have
only a very remote connection to your cause. That's expensive both in terms of
time and money, and seldom results in an out-of-the-blue award.

Monday, October 28, 2013

There are a number of things that determine whether your
mission will be adequately funded. Here
are five things you can do today to bring in more dollars.

1. Match your
organization to the right grantor prospect.

All grantors have a specific mission focus. For instance, while the grantor may generally
support programs for low-income women, they may actually only support a single
facet of that group. There's no use in
applying for funds for heating cost support if the grantor is only funding
breast pumps to allow working mothers to stay in the job market. Read all of
the information you can find on the organization and decide if it is a good fit
for your nonprofit.

2. Refine your focus to emphasize
grantor/grantee alignment.

Don't rely on a one-size-fits-all application. If you have a general emphasis on a specific
client profile, emphasize the portions that have direct alignment to the
prospective grantor. Each grantor and
their mission focus is different and should be developed as such.

3. Match your grant development costs to the potential
award.

If the grantor specifically states that their maximum grant
is $1,000, and it's going to cost $500 for your staff or your contracted
grant professional to produce the grant application and administer the funds,
that might not be cost effective. All grants have non-reimbursable costs, and
you want to get the most return for your investment of time and/or money.

4. Be sure you meet the minimum requirements
to apply

.

Most grants stipulate that you must be a 501(c)(3) to apply,
and may include time in business, minimum existing revenue amounts, ability to
show matching fund potential, formal organization and program budgets, audited
financial statements or other qualifiers as well. If you can't meet ALL of the
requirements, your application is likely to be discarded without even being considered.

5. Document your results to date before you
apply

Grantors want to know that your program is effective and/or
sustainable. Even if you are currently
seeking funding for a one-time event, such as the coming year's holiday turkey
giveaway, show how you will reach the maximum number of intended recipients and
why your program is using the funds to the best possible advantage (things like
getting wholesale pricing for the birds, for example). Long-term existing programs need to show that
they have made a lasting positive impact and have a good chance of continuing
to do so.

None
of these things will guarantee an award, but doing them well will greatly
improve your success rate.

Tuesday, October 22, 2013

When you are presenting your charity to a prospective
supporter, particularly if that first contact is an online application,
establishing the credibility and effectiveness of the organization is vital.

When reviewing grant proposals for clients, many of them are
written in the first person. "I started XYZ Charities" "I contacted so-and-so", I did this
and I did that. Almost as bad is a
constant string of third-person references to the founder.

There is always one person behind the formation of a charity. Someone has to get the ball rolling, and that
founder is very important. If the
charity achieves longevity, it will always be tied to its founder. The Red Cross will always owe its existence to
Clara Barton as the founder. Any history
of a charity will include a nod to its founder, but there does come a time when
that same founder has to be part of a team.

Grantors are interested in supporting an organization
because it effectively advances its mission, and that requires the efforts of
more than one person.

If your grant application reads more like a political
campaign speech than a mission narrative, it might give grantors the idea that
the charity can't survive without you, or worse, that there are no other active
team members.

When the grant asks for a history of your organization, it's
fine to say it was founded by so-and-so, and if that person is still active, a
brief biographical sketch of that persons contributions and qualifications. The
transition to a team philosophy should be introduced as soon as possible after
that initial introduction.

Try something like this.
XYZ Charities was founded in 2005
by Mary Doe, and now operates with a team that includes Joe Doe, Nancy Roe and
Frank Moe, adding the titles and qualifications after each name. That tells
grantors immediately that you are no longer a one-man show. If you should get hit by a bus, the charity
can continue to function, and the money the grantor is investing will not be
lost or wasted.

The old cliché "You only get one chance to make a first
impression" applies in spades here.
Be sure that impression is about your organization, and not just you.

Monday, October 14, 2013

In the short term the U.S. government is a non-functioning
entity, rather more so than usual. Due to the debt limit/shutdown situation, if you go to most of their websites you will
get a message saying the website is not being maintained due to the shutdown.

Grants.gov is still displaying, but a highlighted post from
their blog indicates there could be problems due to staffing shortfalls in
various departments. Of course, appropriations are still to be decided, so that
may cause some funding changes when the current shutdown is resolved. Some
current funding may be held up as well.

Whenever there is a potential disruption in the free flow of
money from Washington, some pundit opines that this will be the end of some or
all Federal grant money. That sort of sounds like wishful thinking or a
political attempt to add to the fear factor.

The government is not likely to end the granting programs
unless we truly do go bankrupt as a nation. Grants are the way that Washington furthers
its social policies. Whatever the dominant party in power, the government "gives
away money" to achieve some desired goal.

Individual departments within the government are subject to
the whims of the majority party. Whether they are pushing for aid to countries outside
the U.S., education, housing, healthcare, or the arts, there will be a lot of
money allocated to advancing those programs. Some individual programs may be
cancelled, but only because they do not fit in the current administration's
scheme of things. Some programs may be moved from grant status to competitive bidding contracts.

Grants and any other kind of federal funding is somewhat
dependent on the supply of money, sometimes as a high priority, and sometimes
not, but throughout our history, the Feds have funneled some funds back to
groups that can advance the agenda du jour.

Forecasting where that money is going to go is far more
important to nonprofits in the short term than worrying about whether the
supply line is going to be shut off forever. If all grants do end, that will be the least
of our worries.

Tuesday, October 8, 2013

If your organization has a committed and effective board,
you are truly blessed. Unfortunately, the clients I deal with usually seem to
have one of the latter two boards. What are the characteristics of these
boards?

What makes a good
board?

A good board works well together. They respect each other's
views. There are no prima donnas. They each have skills and strengths that make
the organization more effective as a whole, and provide stability, control, and
guidance, as well as passion. They support the nonprofit and the mission in
every way that they can. They give freely of their time, and their money if
they have it. They are better ambassadors for the organization than any PR firm
you can hire. Planning, dispassionately evaluating results, and applying
corrective action are the strong points of this type of board.

Committed but
ineffective boards

Committed but ineffective boards have the same type of
passion for the mission, and very often are the hardest workers for the cause. Their
weakness is that they tend to work hard, not smart. Sometimes they are so
focused on success that they don't have the patience to follow through with
strategies or do in-depth planning. They may not have useful skills, and by
that I mean things that come from experience in meeting or solving ordinary
business problems. They are what I call big-picture boards. They know exactly
what result they want, but have no idea how to get there.

They often don't even recognize that they may be the problem.
This type of board finds it easy to blame outside influences. Failure is always someone else's fault.

These are the boards that over-commit available resources,
start programs without any idea of how to sustain them, hate fundraising, and
don't understand the day-to-day process of running an effective nonprofit. If a
grantor asks how they intend to meet their goal, they don't have a series of
step-by-step, measurable goals. If something isn't succeeding, they don't know
how to find the cause and correct it.

Fortunately, as long as this board has the desire and capacity
to learn, they can almost always evolve into that dream board every nonprofit
dreams about having.

Disinterested and
ineffective boards

The third category is the hardest to deal with, primarily
because the reasons for being disinterested and ineffective are so varied.

These boards can be poorly formed in the beginning. By that
I mean that they were conned into serving on the board just so the nonprofit
founder could say there was a board in place. They may have only a passing
interest or even no interest at all in the mission. They may not have
understood that they were making a commitment of time and/or money that they
now find is insupportable in their life. The members may not have the skills
necessary to run an organization. They may have no interest in, or ability to
begin acquiring those skills.

They may be frustrated in their attempts to govern and guide
by a single strong personality, either the founder or a single member that
doesn't work well with dissenting points of view. After a while, the board
feels like a well-used rubber stamp.

The board may be too well entrenched. While continuity is a
great thing, when I see a board primarily comprised of a dozen or so
twenty-year members complaining about lack of results, I worry. After a while,
continuity can become stagnation. Any new members learn quickly that the old
way is the only way.

The board could be made up of what I call "bio
padders". They just like to say they belong to a board, any board, because
it looks good in their biography. They join and that's just about the last time
you see them unless the food is especially good.

Whatever the cause, this type of board needs a make-over, or
even a do-over. The root cause for their situation has to be discovered and
corrected. Sometimes it is up to the founder/president to get new members, and
sometimes the board may have to deal with the disruptive member. Sometimes it
is necessary to bring in a coach or consultant to get things moving again.

Judging from the number of people that say " I do
everything and the board doesn't help", getting this type of board on the
right track is difficult.

If you think you may have a board problem, give me a shout. Sometimes
all it takes is a fresh set of eyes to begin to find the right path. You can
reach me at granthelp@ida.net.

Thursday, October 3, 2013

Unfortunately, there has been another terrible bus crash.
The bus was transporting members of a North Carolina church group when a tire
failed. It seems like we hear about bad
things happening to nonprofit groups far too often.

In a perfect world, bad things wouldn't happen to good
people. In the real world it happens every day. I'm absolutely sure that the
church didn't start that day thinking, "Gee, what would happen if
the bus caused a wreck and killed and injured a lot of people?"

A lot of things happen. Over and above the tragic loss of
lives, survivors sue. If there is
evidence of negligence, even something as simple as the tires being overly
worn, the church may well be found to be the culpable party.

Nonprofits are probably not statistically more likely to
have accidents than any other group. But if your liability insurance only
covers the probable, and not the unforeseen catastrophic event, the repercussions
are likely to be worse.

In working with many nonprofits, I often see insurances that
are the minimum required by law.
Some nonprofits do not even
insure things like their volunteer activities other than through a minimum
coverage general liability policy. Some even rely solely on the volunteer's own
auto liability policy for protection. Sometimes that is a factor of cost, but
in many cases the organization just doesn't think a high-coverage liability
policy is necessary.

This all goes back to planning. Some things are
obvious. If you rescue animals, it is likely that the animals could hurt someone. If you provide donated food to the
hungry, someone could get sick from
eating it. But some things are not so obvious.

I am not an insurance agent. I don't even know any agents as
personal friends, so I'm not shilling for the industry. As a small business
owner for many years I know that the premiums can be a strain on budgets. But I
also know that having to pay a big claim or a damage award can put you out of
business.

Under constant pressure to keep administrative costs down,
it is tempting to buy the cheapest insurance available, or even to go without
it altogether. Don't do it. It's OK to hope for the best, but plan for the
worst.

Saturday, September 21, 2013

There seems to be two schools of thought on blogging. One
says that in the era of short-form social media, it is a waste of time and
resources. The other says that if you don't blog, you are throwing away many
dollars in sales or donations. As is true with most things, the answer to the
question is somewhere in the middle. Before beginning a blog, ask yourself
these questions.

What is your target
audience?

If you are just blogging for your existing customer or donor
base you are preaching to the choir. If they are already following you on
social media or donating and volunteering, they may read the blog and even
enjoy it, but it isn't going to tell them much they aren't going to hear or
read anyway. Blogs should not only keep existing contacts connected, but
generate new customers or donors. You can host your blog separately, or combine it with your website.

If your target audience is people who don't know about your
product or mission yet, a blog can build customer interest or donor engagement.
A 140-character tweet or a short Facebook post just doesn't have enough depth
to truly engage a new reader. Business oriented blogs are both sales and
educational tools. If you want the reader to support you, explaining why your mission,
product or service deserves some of their dollars is easier on a blog. They
have to be able to find you on the web, but after they find you they need a
reason to stay connected.

What's different
about a business blog?

Blogs have come a long way from an individual who is
basically putting their personal diary online. Today, people use Twitter and
Facebook for that. Blogs, at least business blogs ( nonprofits are businesses too!), are much more of a sales and
educational tool than a blow-by-blow description of your day or week. They are
a promotional tool. The purpose is to encourage the people who need a product
or service to patronize your business or support your mission, without
constantly interrupting their day with a constant rain of nonessential
information. Your tweet or FB post is a headline, while the blog is the
article.

1. You have the time and/or money to commit to it as part of
your sales or fundraising strategy for
a year or more. You can hire someone to do it, or do it yourself, but it should
be done on a schedule. Think of the weekly TV program you just can't miss, rather than the occasional mini-series or
special that comes on once, and then is gone. Plan on blogging no less than
once a month, and maybe as often as once a week. This is relationship building,
not an annual grant or loan application. Additionally, search engines tend to pick up on blogs well, probably because you are repeating the same words or themes, i.e. they are good SEO candidates, because you are repeating those same key words of phrases in a totally natural way.

2. You have something new or fresh to say or sell. Not every
topic, mission or service can generate good content every week. If you have
lots of programs, products, or services that you can "sell", or good
stories that these things generate that you can share, then by all means go for
the weekly schedule. Some highly successful bloggers even blog daily, but that
is hard to do effectively. The daily
posts become so short on new content and so repetitive that a tweet
would work just as well. You ideally want to be the weekly can't-miss program,
not a male enhancement commercial.

3. Commit to a blog if you believe in yourself, your
business product or your mission. This is about generating passion and a need
to buy into your concept. Whether it is a need for a product that you sell, or
hungry people you want to feed, or anything in between, your blog needs to sell
that feeling.

4. Commit to quality. You may be able to get away with internet
shorthand on Twitter, but blogs are more akin to white papers than a tweet. If
you are bored with good grammar, hire someone who will refine your raw
material.

Interested in engaging more donors or customers? Give me a
shout at granthelp@ida.net. I would be happy to assist you in starting,
maintaining or expanding your blog.

Thursday, September 19, 2013

The Shubert Foundation, www.shubertfoundation.org, announced the 2013-14 grant guidelines today. The following is from the website. "The Shubert Foundation is dedicated to sustaining and advancing the live performing arts in the United States, with a particular emphasis on theatre and a secondary focus on dance.

In service of this mission, we provide general operating support to not-for-profit, professional resident theatre and dance companies, as well as some arts-related organizations that help support their development. Grant recipients must have track records of artistic achievement, administrative strength and fiscal responsibility."You must be a U.S. based 501(c)(3) in good financial standing. They accept only hard copy submissions, and the application format is available on the site.

Tuesday, September 17, 2013

One of the suggestions I make so often that it should be a
recorded message is that nonprofits need to provide substantiation of their
status on their website home page. Here's a good reason why that is going to
result in more donations.

Recently a friend asked me to research a charity. She had
gone to their website, where everything suggested it was a nonprofit. It had a
dot org DNS address, nice home page, well crafted mission statement, heartfelt
stories of people they helped, donation button, in short, all the things you
would expect on a nonprofit website. On the "about us" page however,
there was some wording that disturbed me. It was subtle, and I don't think it
would have set off alarm bells for most people.

I checked with all the usual verification sites, including
the IRS. No listings. I checked social media. Nice page, but none referenced
their NPO status specifically. Then I did a press release search, and there
they were, back in 2008. "Local entrepreneurial group (name here) opens
OJT training and placement firm".

This "dot org" is a business, plain and simple. Is
it misrepresenting itself as a charity? It sure looks that way. Just for kicks,
I clicked on the donate button, and there it was…"donations are not tax
deductible" in little tiny print. It didn't specifically say that they are
a business. They were relying on that "dot org" and the slick website
to plant the suggestion that they are a charity. I also sent an email
requesting a copy of their nonprofit paperwork, either Federal or state, but I
never got a reply.

If you are putting up or revising a website, and you are a real
nonprofit, I strongly suggest that you provide a link to a copy of your
determination letter, or at least the date you got the letter on your site. Even
if you are only a state-registered nonprofit corporation, don't make
prospective supporters spend an hour or more trying to verify your status. They
won't. They will just leave.

The dot org designation used to be more or less reserved for
nonprofits, but that is no longer true. Schools, churches, some clubs, cities and
really just about anyone can use that domain designation. I have seen some suggestions
that nonprofits should have a DNS registry of their own, but so far it hasn't
happened. Wikipedia states that the number of dot org registrations jumped from
one million or so in the 1990's to over ten million as of June 2012. Could some of those be fraudulent charities? Ab-so-lutely!

You should be proud enough of your nonprofit to provide
irrefutable proof up front of your status. My friend is really into the cause
this phony nonprofit supposedly supports. She would support a legitimate group
well. But I can guarantee that she isn't going to support this one, and she'll
be a lot more discerning about believing a website again, based solely on their
URL and a donate button. She is also reporting them to her state attorney general's office.